Monthly Archives / January 2011

About 12 years ago I was on a train in Tunisia, traveling from Tunis towards El Jem, site of a perfectly preserved Roman colosseum. Passing dusty towns and rolling hillsides of olive trees, there was the occasional stop at a small station.

The visage of strongman Ben Ali, Tunisia’s president, stared from portraits hung in each stop.

It was not far from one of these stations, in the small town of Sidi Bouzid, that a spark ignited that has roiled the world, taking down Ben Ali and in all likelihood other Arab despots.

It was there that local officials, enforcing various bureaucratic regulations, manhandled and humiliated a small produce vendor. After efforts to seek redress, the vendor doused himself with solvents and set himself on fire.

In our country we see business interest whining about “too much regulation”. But in Tunisia we saw reaction to regulation that had become oppression.

And now we see Egyptians, said to be earning $2 a day, taking to the streets to express their rage at their economic and political stagnation. The end to the Cairo standoff may or may not be peaceful.

But whatever happens in Egypt in the short term, it’s another wakeup callfor us in the USA, as old alliances are called in question and as talking heads on TV debate the delicate balance between our national security partners and those who seek true democracy.

My concern is that we are drifting.

We need to reinvent ourselves. My boomer generation eschewed entreprenueurial pursuits and manufacturing. We were counseled to go into professions or financial services. That served many of us very well, but the limitations are now becoming apparent.

Neither of our political parties have it right. Unfortunately, too many Democrats and Republicans believe we can just tax or cut our way to worker prosperity. Neither party is focusing sufficiently on developing a comprehensive policy to support manufacturing and to address job-outsourcing.

Friedman notes that: “Republicans favor deep cuts in government spending, while so far exempting Medicare, Social Security and the defense budget. Not only is that not realistic, but it basically says that our nation’s priorities should be to fund retirement homes for older people rather than better schools for younger people and that we should build new schools in Afghanistan before Alabama.”

The Tunisian and Egyptian revolutions are fueled by young people, mostly under 30.

When will our country’s young people get involved to push for their priorities? Largely non-union, often weak in their grasp of civics, political science and history, what do our young expect of their economic future, and how do they want to prioritize the country’s needs?

On Saturday night in San Diego at CAAA’s 2011 winter conference those peers came out en masse to see Herreras awarded the California Applicants Attorneys Association’s most prestigious award, the Eugene Marias award.

The award, named after a legendary founding member of CAAA, is given to only the most distinguished workers’ comp attorneys as a recognition for lifetime achievement.

Herreras has been a personal icon of mine for several years now. I’ve had a chance to get to know him as we were speakers on a CAAA panel and through membership of the California State Bar Workers Compensation Executive Committee.

His integrity, insight and passion for helping his clients shines through as he speaks. And Bill has always had an easygoing smile and personal style that set him apart from the pack.

Those on the dais with Herreras noted that his part of the state is “Herreras Country”. It’s not hard to imagine that a number of Central California employers and defendants have been taken to the woodshed by Herreras’ formidable litigation talents.

And there was reference to Herrerras’ longtime service as amicus committee chair of CAAA since 1992. In that role Herreras has helped shape workers’ compensation law in California. In many instances he’s argued the cases at the Court of Appeals or the California Supreme Court.

Speakers noted that Herreras never forgot about helping the little guy.And he never forgot his Hispanic heritage.

But perhaps the most touching was the story about Herreras enjoying the law itself. He has been a lawyer’s lawyer. A good Saturday morning was a quiet morning in the law library, to be followed with games with his children on the rest of the weekend.

The California Applicants Attorneys Association has now affiliated with several Teamsters Joint Councils 7 and 42 and the California Teamsters Public Affairs Council.

For some years now there’s been tension between the house of labor and applicant attorneys. As several speakers acknowledged, it was time either to acknowledge likely continued estrangement and deterioration in the relationship or time to rebuild.

Applicant attorneys have had an estranged relationship with many key union figures going back to the 1970’s, the time of the first Brown administration. This reached a culmination in 2004, when attorneys were shut out of backroom negotiations in the early days of the Schwarzenegger administration.

Since that time, attorneys have tried to rebuild these relationships, with some success but with some wariness on both sides.

The irony is that both the applicant atorneys and labor have been strong supporters of the same politicians and political intersts in Sacramento. And applicant attorneys have continued to advocate for worker rights and worker safety even as union membership in California declined.

But style and personality issues were a huge problem.

The Teamster/CAAA alliance signals a new day.

Rebuild it will be.

In the words of one Sacramento power player,rather than “wondering what goes on in the house of labor”, applicant attorneys will now “occupy one of the bedrooms in that house”.

Among other key points made:

-part of the past problem between CAAA and labor was a result of style rather than content-many figures in the labor community have regrets over SB899-“you belong with us’-key labor figures, including ones at the California Federation of Labor, are appreciative of this move-as a class, the public does not like lawyers but they do like lawyers who help people and applicant attorneys fit that description-applicant attorneys help the most vulnerable and deserve labor’s respect and cooperation

As you can see, stats are organized by program and also for personnel costs.

This is all preliminary, of course. The Governor is trying to thread a needle in getting some bipartisan support for a referendum on tax solutions to accompany cuts to selected programs. How all that plays out could affect how the ultimate budget looks for the comp community.

Compound drugs will be a hot California legislative and regulatory item in 2011.

At the January 5, 2011 CHSWC meeting, Barbara O. Wynn of the RAND Institute for Civil Justice and RAND Health presented a study in process on compound drugs in California’ Workers’ Compensation System.

As noted in a recent article by Los Angeles Times reporter Marc Lifsher, an “unusual coalition” is forming to push legislative controls on compound drug prescriptions. California Senator Mark DeSaulnier (D-Concord) and Assemblyman Jose Solorio (D-Santa Ana) are said to be backing proposed legislative controls.

This would not be the first time.

Several years ago the California DWC had considered a limit or ban on compound drugs under treatment guidelines, but that was never adopted. The MTUS guidelines ultimately adopted did not ban compounded drugs.

MTUS guidelines relied heavily on the ODG Guidelines from the Work Loss Data Institute, which did not forbid compounding.

But the issue of compounding drug usage and pricing has continued to build. Some doctors are providing “nutriceuticals”.

In August 2010 the California Workers’ Compensation Institute published a study by John Ireland and Alex Swedlow, titled “The Cost and Utilization of Compound Drugs, Convenience Packs and Medical Foods in California Workers’ Compensation”.

Here’s the Executive Summary of that study by the CWCI: “In 2002, California lawmakers enacted AB 749, the first of several workers’ compensation reforms that included provisions to modify the delivery of pharmacy benefits and contain the rapidly escalating cost of prescription drugs used to treat injured workers.In response, state regulators held public hearings and by January 2004 adopted a workers’ compensation pharmacy fee schedule. That schedule capped maximum reimbursements for pharmacy services and drugs at 100 percent of the Medi-Cal rates, which at the time, were at least 10 percent belowthe average wholesale price (AWP) for prescription drugs, plus a dispens- ing fee. However, for medications not covered by Medi-Cal – such as repackaged drugs dispensed from a physician’s office – maximum reasonable fees were still governed by the Official Medical Fee Schedule that had been in effect in 2003. That schedule set maximum fees at 140 percent of the AWP for generic drugs, and 110 percent of the AWP forbrand drugs, plus a dispensing fee.This differential pricing system allowed physicians who dispensed repackaged drugs directly from their offices to be paid significantly more than pharmacies for the same medications. A recent Institute study1 found that in 2006, workers’ compensation reimbursements for repackaged drugs often exceeded the amounts paid for equivalent phar- macy-based prescription by 500 percent or more. Given that incentive, some companies began heavily marketing repackaged drug programs to workers’ compensation medical providers as a means of enhancing their revenue. As a result, by 2006, repackaged drugs dispensed by doctors accounted for more than half of all workers’ compensation prescriptions dispensed in California, and nearly 60 percent of all workers’ compensation prescription dollars.In 2007, the Division of Workers’ Compensation responded by revising the pharmacy fee schedule which, as of March of that year, largely eliminated the differential pricing. The effect was immediate, as both the volume of repackaged drugs and the amounts paid for these medications plummeted, declining more than 90 percent by 2008.After the repackaged drug regula- tions took effect in March 2007, some companies began promoting compound drugs and convenience packs (“co-packs”) comprised of prescription medications and “medical foods” to California workers’ compensation medical providers. Even though there are ongoing disputes over whether the use of these substances is appropriate and what the proper reimbursement should be, anecdotal reports from workers’ compensation payors suggest their use has increased significantly in recent years. This study examines the issue using prescription data compiled from several regional and national workers’ compensation insurance companies to estimate recent changes in the volume and reimbursement of compound drugs, convenience packs and medical foods in California workers’ compensation.”

The bottom line is that payments for compound drugs and medical foods has grown to a figure as high as 12% of pharmaceutical expenses in the system in 2009. That’s a whopping increase, up from 2.3%.

While there may be some situations that require compounded medications, use on this scale is highly questionable.

Recognizing the problem, CHSWC was asked by the legislature to prepare a background analysis.

In her powerpoint presentation, RAND’s Wynn noted that more data is being gathered, so an actual report has not yet been rendered. But a few points key points emerged: -the FDA does not regulate compound drugs, but there are some “red flags” for enforcement action -most compound drugs prescribed are topical creams and lotions -MTUS guidelines do address topical analgesics to some extent -financial incentives may be driving compound drug usage rather than medical need in many instances -the DWC rules for repackaged drugs don’t address all the pricing issues with compound drugs, many of which have ingredients not in the Medi-Cal database -payers and employers already have some tools to address compound drug issues

Wynn noted that possible regulatory and legislative policy initiatives could include: -updating and expanding the MTUS to address compound drugs as a product class -explicitly addressing compounding drugs in fee schedule regulations -legislation to specify compound drug coverage, but noting that this could “constrain flexibility to address evolving issues” and could have “unintended consequences” -steps to reduce the financial incentives for use of medical foods and compound drugs

When the RAND study is released it may provide additional ammunition for reforms.

In 2010, Solorio sponsored AB 2779, which would have effected some price controls over compound drugs. But AB 2779 did not make it to the Governor’s desk.

Labor and the the influential employer-side California Coalition on Workers’ Comp are said to be backing the effort this time.

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About Julius Young

A Partner at Boxer & Gerson LLP, Julius has practiced worker’s compensation and social security disability law since 1979. He has represented thousands of individuals who have sustained life-changing injuries or illnesses while on the job. In every case, his goal is to secure the medical treatments his clients need.